Yen Trading Prospects and Pitfalls


Traders looking to capitalize on persistent yen weakness should likely target one pair in particular, staying cautious around some clearly defined technical exhaustion levels in the process.

While looking to take advantage of Japanese yen (JPY) weakness, the USDJPY makes the most sense in terms of base currency strength. Most of the pairs trading against the JPY have weakness on the other side, making for more of a footrace set up for which JPY weakness may have to compete with weakness from the other currency. The AUDJPY is a classic example of that scenario.

The potential for USDJPY follow-through to the upside this week depends on Fed Chairman Ben Bernanke’s two-day testimony before Congress. It’s a risk-appetite move any way you slice it, and the pair has the chance to fire on both cylinders by way of simultaneous yen weakness and US dollar (USD) strength. The problem, however, is that the daily chart is choppy and prices are closer to a fade (short sell) off the 101.50 level.

Guest Commentary: Recent Price Action in USD/JPY

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The flip side of the 101.50 resistance is that it’s the same decision level a momentum buyer could consider on a breakout buy. For now, it is oversold resistance and likely to hold until Wednesday when Bernanke’s testimony begins.

Since the 34-period exponential moving average (EMA) wave is still traveling sideways at “four to six o’clock,” I will consider this a market environment that is (technically) set up to exhaust along range extremes.

Guest Commentary: High-Probability Set-ups in USD/JPY

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Two likely exhaustion points are higher resistance levels, one of which is the 52-week USDJPY high at 103.72, and the other being the AUDJPY uptrend line support sitting just above the 94 handle. I’m looking for continued range-bound action until the Dow rallies through 15,500 and the US dollar index accelerates through 85.00.

By Raghee Horner of

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